Institutional owners may consider drastic measures as Cardlytics, Inc.'s (NASDAQ:CDLX) recent US$24m drop adds to long-term losses

Key Insights

• Significantly high institutional ownership implies Cardlytics' stock price is sensitive to their trading actions
• 51% of the business is held by the top 15 shareholders
• Recent purchases by insiders

If you want to know who really controls Cardlytics, Inc. (NASDAQ:CDLX), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 12% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 81% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Cardlytics which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Cardlytics.

See our latest analysis for Cardlytics

What Does The Institutional Ownership Tell Us About Cardlytics?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Cardlytics does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Cardlytics' earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 13% of Cardlytics shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. CAS Investment Partners, LLC is currently the company's largest shareholder with 13% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.3% and 4.8% of the stock. In addition, we found that Karim Temsamani, the CEO has 0.8% of the shares allocated to their name.

After doing some more digging, we found that the top 15 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Cardlytics

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Cardlytics, Inc.. In their own names, insiders own US$3.8m worth of stock in the US$171m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 27% stake in Cardlytics. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Cardlytics you should be aware of, and 1 of them is significant.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.